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Creditors File Lawsuit on China South City’s Keepwell Support
June 5, 2024
A group of creditors of China South City have filed a lawsuit in Hong Kong against Shenzhen SEZ Construction and Development Group Co. Ltd (SZCDG), a state-owned shareholder of the developer. They aim to recover an amount to the tune of $1.4bn, noting that SZCDG entered into a keepwell deed with them, but did not provide credit support. SZCDG had entered into a keepwell deed with creditors on 9 August 2022 to assist China South City in meeting repayments under a series of senior bonds. China South City had missed a dollar bond payment in February, and failed to make payments on two tranches of the bond in April. This is the first lawsuit against a Chinese state shareholder of a developer for recovery of payments owed to creditors under the keepwell provision since 2021. It also comes about a month after a Hong Kong court ruled in favor of creditors regarding keepwell provisions.
China South City’s dollar bonds are trading at 22-23 cents on the dollar.
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